The Philippines: The Next Leading Offshore Player

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The PhilippinesThe Next Leading Offshore Player

• Almaris Ancin
• Leonie Alexandre
• Caroline Curammeng
• Marques Storr

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A Geography Lesson
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A Geography Lesson
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A Geography Lesson

• Consists of 7,108 islands off the southeast
  coast of the Asian mainland
• Total land area of 115,000 square miles (roughly
  the size of Italy or Arizona)

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A Geography Lesson

• Location is strategic
• Situated on the crossroads of Asias
  commerce and transportation, it plays a
  significant role in international affairs. It
  serves as a bastion of democracy and a convenient
  and vital link between the two worlds the East
  and the West.
• - Doing Business in the Philippines by Price
  Waterhouse

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A Geography Lesson

• 13 key regions

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A Geography Lesson

• 13 key regions

• Illocos well-known beaches

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A Geography Lesson

• 13 key regions

• Illocos well-known beaches

• Central Visayas emerging
• growth center

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A Geography Lesson

• 13 key regions

• Illocos well-known beaches

• Central Visayas emerging
• growth center

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A Geography Lesson

• 13 key regions

• Illocos well-known beaches

• Central Visayas emerging
• growth center

• Northern Capital Region
• (Metro-Manila)
• 1. Manila capital city
• 2. Makati major commercial center
• 3. Kalookan City
• 4. Quezon City

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A Geography Lesson

• 13 key regions

• Illocos well-known beaches

• Central Visayas emerging
• growth center

• Northern Capital Region
• (Metro-Manila)
• 1. Manila capital city
• 2. Makati major commercial center
• 3. Kalookan City
• 4. Quezon City

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A Brief History

• The Philippines had social and economic ties to
  China dating back to the 9th century
• In the early 1500s, the Spanish started a
  300-year rule that left lasting impressions on
  the culture of the Philippines
• 1. Religion
• 2. Cuisine
• 3. Language
• How are you?
• Cómo estás?
• Kumusta?

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A Brief History

• In 1898 America acquired the Philippines from
  Spain
• The 48-year tutelage resulted in important
  American contributions
• 1. Development of strong Filipino leaders
  capable of running an independent government
• 2. A system of free education that emphasized
  democratic traditions
• 3. Democratic elections
• 4. English as a predominant language
• The Philippines gained independence in 1946

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Effects of Colonialism

• 1987 Constitution declared the Philippines a
  democratic republican state with a presidential
  form of government
• Government consists of three branches
• 1. Executive Branch headed by President who
  appoints cabinet
• 2. Legislative Branch Senate and House of
  Representatives
• 3. Judicial Branch Supreme Court
• 4. Independent Agencies Securities and
  Exchange Commission
• Many existing laws are based on Spanish and
  American statutes
• 1. US model of government brings stability and
  a defined process for handling political issues

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Effects of Colonialism

• The combined influence of the colonialists have
  made the Philippines
• 1. One of the most westernized of any Asian
  country
• - Stephanie Overby, CIO Magazine
• 2. The oldest working democracy in Asia
• 3. World-class English proficiency
• a. Third-largest English speaking country in
  the world
• 4. Ranked the third-most educated nation in
  Asia by World Bank

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The Filipino People

• Population
• 1. 76.5 million
• Language
• 1. Bilingual
• 2. 87 different Filipino dialects
• 3. American English is the basic language in
  schools, government, business dealings, and
  everyday conversation

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The Filipino People

• Education
• 1. Patterned after the US system
• a. free public schools at elementary and
  secondary levels
• 2. Filipinos have a deep regard for education,
  which they view as a primary avenue for upward
  social and economic mobility. - Library of
  Congress
• 3. 95 literacy rate
• Religion
• 1. 93 of country is Christian (83 are Roman
  Catholics)
• a. The only predominantly Christian country in
  Asia
• 2. Small minority of Muslims in southern
  Mindanao (4)

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Famous Pinoys
Inventions Two-way television telephone
Airplane engine that runs on alcohol instead of
aviation fuel Fluorescent lamp Single chip
video camera Karaoke machine
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The Philippine Economy
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The Philippine Economy

• Though the economy suffered in the late 90s as
  a result of the Asian Financial Crisis, analysts
  are predicting future growth
• 1. With strong domestic consumption and
  improved exports, the Philippine economy is
  forecast to grow 4.5 in 2004
• 2. Services will have a higher growth rate than
  other sectors
• 3. Imports will be slower than exports
• 4. Inflation will remain low at 4.5
• The Negative side
• 1. Fiscal deficit rose sharply to P212.7 billion
  (US4.07 billion) in 2002, or 5.4 of gross
  domestic product (GDP)
• 2. Unemployment remains high at 11.4
• 3. Conflict in Mindanao has contributed to a
  loss of business confidence and has had a
  negative impact on economic growth, investment
  and development prospects.

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The Philippine Economy

• Historically a protectionist, inward looking
  country is now ranked by the World Bank as one of
  the most deregulated countries in Asia
• Now considered a liberalized, trade-oriented
  economy

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Market Assessment

• Incentives
• Relatively stable administration committed to
  reforming economy
• Positive attitude towards foreign investments
• Special economic zones that make the country an
  attractive base for manufacturing export products
• Receptiveness of family-owned corporations to
  joint ventures with foreign firms
• Decline in tariffs and import barriers
• English speaking, highly trainable workforce

• Drawbacks
• High cost of nationwide distribution due to
  archipelago geography and poor transport
  infrastructure
• Local consumers relatively limited purchasing
  power with more than half of the countrys income
  flowing to the richest 20 of population
• Relatively high degree of wage control

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Why Outsource in the Philippines?

• The fastest growing outpost of the high-tech
  economy
• Accessible by air within 4 hours of any Asian
  capital
• Gateway for international shipping, air lanes
• Entry point to the worlds largest market with
  over 2 billion people.
• Ranks high as a location for outsourced solution.

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Why Outsource in the Philippines?

• Provides affordable quality human resource
• skilled labor force of 29 million
• literacy rate of 95
• 3rd largest English speaking nation
• Customer-service-oriented workforce
• High-quality, low cost labor

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Why Outsource in the Philippines?

• The Philippines ranked 4th overall worldwide as
  the best source IT professionals.
• - US based Meta Group

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Why Outsource in the Philippines?

• The country was also rated ahead of its Asian
  neighbors for excellent availability of skilled
  workers, reinforcing its goal to become an ITC
  hub in Asia.
• The Philippines is the best kept secret in the
  IT industry.
• US based Meta Group

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Why Outsource in the Philippines?

• Were a very open economy, and our culture is
  very well adapted to Western business practices.
• Gloria Macapagal Arroyo
• Philippines president

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Risks Associated w/ the Philippines

• Low awareness of the Philippines as an offshore
  contender
• Lack of experienced operations management teams
• Migration of workers to the United States

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Risks Associated w/ the Philippines

• Political instability
• Impeachment of President Joseph Estrada
• Terrorism
• small militant Islamic group ties with Al Qaeda
• Shadows of India

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Philippines vs. India
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Philippines vs. Vietnam
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Philippines vs. China
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Philippines vs. South Korea
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Philippines vs. Malaysia
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AIGBPSI

• Philamalife and AIG American General formed AIG
  Business Processing Services in August 2002
• 150 employees
• Estimated savings of 40 - 45
• Intensive training on US Insurance Industry,
  AIG-AG operations, procedures, systems, PC,
  communication and customer service skills

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AIG in the Philippines

• People are more familiar with American jargon and
  culture
• Western expatriates preferred living in the
  Philippines
• The financial reporting and accounting standards
  aligned with U.S. standards
• Government provided critical support through
  incentives such as tax holidays
• Philamlife has been in business for more than
  fifty years
• Deregulated telecom industry
• IT a big part in education system

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AIGBPSI - Quality

• Gearing towards Quality Assurance
• Target Insurance Functions
• New Business mail match, text encoding, data
  entry and requirements management
• Post Sales Servicing tile, correspondence,
  premium, disbursements, call center, claims
• Support Functions index, return mail
• Licensing Contracting

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Insights

• Critical to have a strong local partner
• Clear executive support and employee
  communication required
• Philippines can be a global e-services hub
• Filipinos are rich in talent and skill
• Cost alone cannot be the single motivating factor

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Other Firms
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Current Events in the Philippines

• Effects on the government
• Infrastructure? Emerging or diminishing

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Effects on the government

• Defense Secretary Angelo Reyes said he is used to
  being a target but he recently resigned due to
  the second government casualty of a military
  mutiny last month.
• He believes that the attacks on the government
  are efforts to undercut the Philippines'
  17-year-old democracy and besmirch and divide the
  armed forces.

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Effects on the government

• According to government statistics, the
  Philippines has more than 1.8 million drug
  addicts and 1.6 million recreational users of
  illicit drugs.
• President Gloria Macapagal-Arroyo wants police to
  launch a shame campaign against known drug
  pushers.  She promised 1 billion pesos, more than
  18 million, to fund the fight. 

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Infrastructure

• Same Accounting Standards accepted by the US
• Majority of 90 million citizens speak English
• Roughly 350,00 Filipinos graduate from colleges
  and universities each year
• Multiple undersea cables to every region of the
  world

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Infrastructure Problems

• It lacks the size and scale of the Software
  Industry.
• Filipino companies also do not possess major
  certifications such as SEI CMM. These
  certifications would allow for the country to be
  more competitive in the market.

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Comparison Chart
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Notes

• Network World
• Boston Globe
• CIO Magazine
• E-Services Philippines
• Business Week
• Vertex Solutions
• Offshore IT outsourcing to Philippines
• A World of Outsourcing
• CIO-Asia
• Outsourcing Philippines
• Board of Investments

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Filipino Photo Album

• Group 7 Vacation Pictures

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